Email ElizabethCan This Carmichael Short Sale Be Saved?
A short sale home in Carmichael closed escrow this week that might not have closed at all if it had fallen into the paws of some other Sacramento short sale agent. But fortunately, the seller called me. It was kind of like a story that could be printed in a national magazine. Remember those magazine articles from Ladies Home Journal: Can this marriage be saved?To be honest, I wouldn’t read the story, you know, I’d just say NO and throw the magazine back on the table in the doctor’s waiting room. Well, this is a version of what I call: Can this short sale be saved?
It had everything set against it except willing participants. There were a lot of drawbacks. See, as a Sacramento short sale agent, I know that the secret to closing a short sale is to correctly assess the situation upfront and address potential issues. Here were some of the issues with this particular Carmichael short sale:
- Green pool
- No water service
- Charged-off first mortgage
- Second Bank of America mortgage
- Seller had no additional funds
Not to mention, the comparable sales could go either way. Up or down. It was a non-conforming Carmichael neighborhood with a mix of expensive and entry-level homes. That meant we could have difficulties with a BPO. There was also a slight odor from a cat. All the ingredients for a challenging short sale.
My first and foremost duty is always to the seller. We had to figure out a way to close this short sale with the least amount of problems and try to put some cash into the seller’s hands. We had to make sure the delinquent water bill did not become a lien, because in a HAFA short sale the seller cannot pay a recorded lien from the relocation incentive, but a seller can pay a utility bill. An agent who doesn’t do a lot of HAFA short sales would not know this fact.
We also needed to clean up the pool because the buyer for this house would most likely be an FHA buyer. You can’t get an FHA loan with a green, slimy pool. To clean up the pool, we had to turn on the water. The water had been shut off because nobody lived there anymore and the bill was a few months overdue. Another requirement for a HAFA relocation incentive is the seller has to occupy the property. The seller can do a HAFA without living in the home but she won’t qualify for the incentive if she’s not physically living in the house.
However, the icing on the cake with this short sale was the fact the loan had been sent to charge-off. The new lender was not a participant in HAFA. That meant the seller could not do a HAFA short sale. So, that idea was a moot point. On top of all of this, the short sale would be delayed because the second was held by Bank of America. This meant dealing with Equator for the second just like it was a first, except it wasn’t. Archaic procedure for a second mortgage. 90-day escrow period minimum. Every time I turned around, an obstacle presented itself.
Another Sacramento short sale agent might not have listed this short sale. I couldn’t do that to the sellers. The sellers were some of the nicest people you’d ever want to meet. Sweet, kind, caring. They had a strong attachment to the home. There was an emotional bond. It was not easy for them to sell this house. But I knew we just had to find the right buyer. There is always the right buyer for a home, even a home scented by a cat with kidney disease.
It took a while but we found a buyer. The sellers borrowed money from relatives, worked out a deal with the water company and shocked the pool. It was a struggle to keep the utilities on. People don’t think about what sellers have to go through to sell a short sale when they no longer live in the home. They have to pay for utilities in 2 homes. Many people can’t afford the utility bills for one home much less 2 homes. They have to protect the home and check it after showings because careless agents can leave doors unlocked, which is a disgrace in itself.
I was able to work out a compromise with the new first lender to pay an incentive to the seller even though she did not qualify for a HAFA short sale. It was enough to repay her relatives, pay the remaining balance of her water bill and ease other expenses. The lender gave us a break on the BPO due to the cat odor. We got approval from both lenders. And perhaps the nicest ending was the seller met the buyers the day it closed and was able to talk with them, show them how to operate the pool, listen to their ideas for home improvement projects and gracefully exit. That’s the ideal ending for every short sale: a graceful exit.
A Chase Bank Short Sale Loves Me, Chase Bank Loves Me Not
Usually I do not talk about Sacramento short sales until they close, just as a matter of policy. But this particular Chase short sale is so bizarre; whatever happens the seller is beyond giving much of a hoot, even though the bank is offering, let’s say $50,000 in cash for a home worth, let’s say $200,000.
The problem is there is a second loan held by a collection agency. The second has been sold over and over. It’s amazing that there is a market, a physical financial market for a second loan without any equity. There is a way that collection agencies can make big bucks buying up worthless instruments. You would think there is something illegal or against the law with this kind of practice, but everybody just looks the other way and shrugs their shoulders when I ask about it. It’s not a small financial practice, it’s a huge money-making venture. Hand-over-fist piles and piles of money is manufactured out of thin air! Nobody is talking about it.
The second problem is Chase has flagged this short sale as a file that needs a huge cash payment by Chase to the seller. To a person with an underwater home. Why does Chase need to give the seller $50,000? Nobody is saying. It’s unrelated to the National Mortgage Settlement because it’s been going on for more than a year. See, the thing with a Chase short sale is these short sales are not in Equator like almost every other short sale. These short sales are negotiated directly with Chase so they take forever to get approval. On average, my Chase short sales get approved in 3 to 4 months.
Because of California Civil Code 580e, the seller cannot make any contribution in a short sale. The second lender says if the seller is receiving a huge wad of cash from Chase, they want more of it. But the seller can’t give it to them. So, the answer is the seller gets nothing. We received short sale approval on this with Chase giving the seller nothing, and then the buyer split. Sorta par for the course.
Now we are back with a new buyer trying to get a second approval from Chase. This time Chase says it can’t issue approval unless the seller takes the $50,000. What? It’s a Chase Bank short sale like this that can make a Sacramento short sale agent pull out her hair.
Feds to Allow Current Mortgage Payments for Short Sales
I realize how horrible it sounds when our government tells a seller that she cannot be current on her mortgage payments if she hopes to do a short sale. For years, the government has been telling people to stop making mortgage payments, if you can believe that. It’s true. Fannie Mae and Freddie Mac, government-sponsored entities, require a default for a short sale. Come November 1, though, all of that changes. The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, yesterday announced new streamlined short sale guidelines, effective November 1, to permit a short sale in eligible cases of hardships without a delinquency. It’s about time!
This means the feds will allow current mortgage payments for short sales. What a relief for sellers worried about delinquencies. The thing people don’t realize is there are different types of short sales. The type of short sale depends on the investor. Rules that govern a traditional short sale do not apply to Fannie Mae and Freddie Mac, including other types of short sales such as FHA or VA or CalVet. And let’s not even talk about the grandmother and granddaddy of all short sales: the Fannie Mae HAFA short sale or Freddie Mac HAFA short sale. Many short sale agents would rather be forced to walk barefoot across hot coals than to do a Fannie Mae HAFA short sale or a Freddie Mac HAFA short sale because those are painful enough for everybody.
Not only will a seller be able to remain current on her mortgage if she has a Fannie Mae or Freddie Mac loan, but the new guidelines give servicers delegated authority. Banks that service these loans can determine whether the seller’s hardship will qualify for a short sale. Common hardship reasons are:
- death
- divorce
- unemployment
- relocation
- medical
Plus, if a borrower must relocate due to a commute of more than 50 miles to work, which is a fact of life for many of us in California, that constitutes a hardship as well. This is a welcome relief for this Sacramento short sale agent and my sellers in Sacramento. Being current on mortgage payments for a short sale is a huge improvement. It’s like we’ve been beating our heads back and forth in the doorway for years. You know how good it feels to stop!
Now if we can just get Fannie Mae to stop sending short sales to auction because the short sale can’t close prior to the trustee’s auction date, we’ll have something to truly celebrate. We need a way to postpone the auction in a Fannie Mae short sale. Come on, FHFA, I know you can do it. We’re rooting for ya in Sacramento. But for now, us hungry little squirrels, we’ll take the peanuts you toss.
Clear Out the Clutter Before Home Selling in Sacramento
Most people have too much personal stuff, and this Sacramento real estate agent is no exception. I tell my clients to clear out rooms to make them look more spacious while I continue to shove furniture into mine. Of course, my home is not for sale. And we don’t invite any friends over because we don’t have any friends. Yet, our motto is if something comes into the house, something must go out.
OK, I admit that’s my motto and not that of my husband. Getting him to part with any personal belonging is tragic. Once a treasure touches his hands, it somehow transforms from an inanimate object into a living, breathing artifact worthy of preservation until the end of time.
But for the rest of us, into the trash. Or, to the Salvation Army or some other charity. Or, my favorite, the curb in front of our house, because it’s so immediate. I hardly ever see anybody remove the stuff — it’s magical elves who come in the night. Except for this guy who knocked on the door yesterday to ask me if there were any parasites living in the Oriental rug I had placed on a chair at the curb. Excuse me, parasites? Is that what you expect when an owner decides to clear out the clutter?
We had cleaned out the garage. The garage is a place where things go to prepare to die. It’s like the stopping ground before a final death. The weigh station before the graveyard. The hospice, like Denver International Airport. It’s for things we aren’t quite ready to part with, things that we might have some use for down the road and would be devastated, I imagine, if we could not find it in the garage when this immediate and urgent need arose. Of course, I can’t ever recall going out to the garage to find a stored item that I really, really needed to use at that very moment but if I needed it, it would be there.
Like a kitchen chair that came with a table and 5 other chairs but doesn’t fit in our kitchen space. It’s been living in the garage for 7 years. My husband pleaded with me, as I ferociously marched this kitchen chair to the curb, to return the chair to its rightful spot in the garage. His rationale was someday in the future we might want to give away our kitchen table, along with its 5 remaining chairs, and our lucky recipient would be horrified to discover the set did not come with 6 chairs. Oh, contraire, sugar bear. Our lucky recipient would be thrilled with the set of 4 chairs and one bonus chair that she can store in the garage. It’s one way to clear out the clutter.
Which brings me to a point about selling homes in Sacramento. See, it doesn’t matter if your home is a short sale or it’s a regular traditional sale, almost every home on the planet will show better with fewer pieces of furniture. Every seller should prepare a home for sale. Take down those photos on the walls — those grinning pictures of Aunt Mildred and Uncle Henry toking up in 1969 at Woodstock — and clear out the clutter. Your Sacramento real estate agent will thank you. And you’ll most likely sell faster and at a higher price. Not to mention, if you’re driving around homes in Land Park, please, feel free to take that kitchen chair sitting at the curb. I’m no stranger either to having to clear out the clutter.
How Do Sacramento Appraisals Work?
People think Sacramento appraisals are etched in stone, but that kind of thinking is flawed. Appraisals represent an opinion of value. Get 10 appraisers together in a room, and you’ll have 10 opinions of value, and some of them will undoubtedly be worthless. But that doesn’t stop people from thinking their home in Sacramento is worth a certain value because the appraiser said so or the agent said so.
Market value is that price at which a seller is willing to sell and an able buyer is willing to buy. It’s when you throw a lender into the mix that appraisals come into play. This is a reason sellers tend to prefer cash buyers. When you throw an appraiser into the transaction, it’s not unusual for market value to vanish — poof! The appraisal is for the lender, to protect the lender’s security; it’s not for the buyer, even though the buyer pays for it.
I closed a Sacramento short sale transaction this month in which we had 2 appraisals. The first was ordered by the mortgage lender by mistake. It was a conventional appraisal, not an FHA appraisal, and there is a difference between the two. The conventional appraisal came in at, oh, let’s say $200,000. The problem was the buyer had applied for an FHA loan, not a conventional loan and did not qualify for a conventional loan. So, the buyer could not use the $200,000 appraisal for her loan.
Enter the FHA appraiser. Her appraised value was, oh, let’s say $180,000. Yup, a $20,000 difference. Which appraiser was right? They were both right, if you can believe that. Because this transaction was a short sale, though, the short sale bank had plenty to say about that FHA appraisal at $180,000. The bank had approved a sales price of $200,000. It would not agree to let the seller sell at $180,000. We supplied comparable sales and argued, but in the end, the bank agreed to, let’s say $195,000. The buyer had to pay the difference of $5,000.
How much was that home in Sacramento worth? It was worth $200,000 to the buyer. The buyer always has the last word. If you’re thinking about listing your home in Sacramento, hire the best Sacramento real estate agent you can find. Because you want somebody on your side, not just the agent who will promise the highest sales price. Agents will list at whatever price a seller wants. The agent doesn’t choose the price. And the seller doesn’t, either. It’s the buyer.
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